To: Tom Bunge who wrote (2969 ) 5/28/1999 3:53:00 AM From: michael r potter Read Replies (1) | Respond to
Tom, Have spent some time thinking about your questions. First, I believe, and the trading pattern shows, that SFE is tied to the performance of the internet sector. It should be as the bulk of the stock price is its internet exposure. Furthermore, the value of ICG and any other SFE partially owned IPOs will in large part be determined by the health of the internet market when they come out. ICG will be a big IPO performance wise. Will it settle in at $50, $100, or $150 in the after-market? It not only matters to shareholders by virtue of their participation, but probably more importantly to SFE as its interests are monetized and becomes a big part of the NAV. The range they settle in after coming public, should have a lot to do with the price SFE trades for now and immediately ahead. The market is always trying to accurately discount what it sees months ahead in current prices. This is why the health of the internet market is vital in assessing what SFE will do over the short to intermediate term. I do expect SFE to have a run-up before the IPO, but believe it is way to soon to affect SFEs price in the immediate future. For reasons mentioned in many other posts, I still come down on the side that this is not just another of the many deep corrections in internet stocks, with the group off to the races as happened after each of the previous sell-offs. There will of course be sharp bounces that last a few days or maybe weeks, but I think they will be sold into and the old highs will remain far out of reach for most. Can't back it up with facts and figures, certainly could be wrong, but one should answer that question before deciding how exposed to be in SFE and how much cash to hold in reserve for buying later. The valuation of SFE is a lot better than at $95 or $120, so that part of the risk in the risk/reward equation has been improved. Other than bounces, just can't see the big upside. Still feel that margin liquidation will come into play at some point, but apparently it has only increased maybe 50% at some discount brokerages. I'd define a sign of real stress being several days of maybe 4 or 5 X normal margin calls. [Others this week are defining real stress as getting a margin call now!]. The reason IMO this is important to talk about is that if the premise is true about SFE and internet stocks being integrally linked, then should heavy margin liquidation be experienced, internet related stocks would certainly be the first wave, and that would exacerbate their decline-also affecting SFE. Should that occur down the line, it could be a buy signal. Another possible buy signal that will probably come quicker would be the long term stochastic going to a buy. There are probably some trendlines to check out if some serious upside starts-to see if they are taken out. I'm not necessarily trying to buy this or any stock at a magic bottom. I try to buy when the reward vs risk is maximized for the time period contemplated. That can occur at lower levels or higher levels. Sometimes, as seen in short term trading reports posted in the past, it appears close to the action taken-not days in advance. It is good to have a framework to work around though. As for Safeguard as a company, I like what they [we] are doing and believe their actions will maximize share-holder value vs. other courses they could have taken. It would have been nice if ICG had come out during the March-April period, but maybe I'm wrong, I-net froth will return-[not just for a week] and their later timing will look good. For now, am holding some reserves [for a reformed margin junkie, staying off margin is at times painful-holding cash is excruciating!]. Thanks to those who shared their thoughts and links -we need more. Mike
